Health Insurance Options After a Job Loss

By gerencherk

When your health insurance is sponsored by your employer, as it is for 158 million Americans, losing your job or having your hours reduced can amount to a double whammy: Gone not only is your income but the health coverage you counted on. And with less money coming in, financing a replacement option on your own often becomes a high hurdle.

“Insurance transitions are usually tricky,” says Karen Pollitz, research professor at Georgetown University’s Health Policy Institute in Washington. “Your insurance can kind of cut out on you automatically, and replacing it can be a challenge.”

Where to begin when you lose access to an employer-sponsored plan? For some people, the answer is easy — they join their spouse’s job-based group plan. In that case, you can transition right away instead of having to wait for the annual open enrollment period. But you have to act fast: If you don’t notify your spouse’s human resources department of your change in status within 30 days of losing coverage, you could forfeit that option, Pollitz says.

If you don’t have a spouse’s employer group plan available to you as a back-up, there’s always Cobra, the acronym for the law that allows you to continue on your employer’s plan generally up to 18 months after a job loss — as long as your employer has at least 20 workers. If you worked for a small business that offered health coverage, you may be able to get Cobra-like continuation from a state-administered program. Visit Georgetown’s “Consumer Guides for Getting and Keeping Health Insurance” at www.healthinsuranceinfo.net to learn more about your state’s programs and options.

While Cobra can be helpful, especially for people undergoing a course of treatment, it’s often too expensive to be a viable solution because you’re on the hook for the whole premium plus a 2% administrative fee. The average price? Around $400 a month for an individual and $1,000 a month for family coverage, Pollitz says.

“The sticker shock is pretty horrific,” she says. “What you’re used to seeing deducted from your check — that’s just a fraction and you’ll see the rest of the pie when you go into Cobra.”

If your layoff or reduction in hours came about because of international trade and you’re newly uninsured, you may qualify for a federal health-care tax credit. Under the HCTC, as it’s known in health policy circles, the government pays for 65% of the health insurance premium and you pay 35%, Pollitz says.

Individual policies

Another option is buying a policy on the individual market, but things can get dicey when you move away from group coverage. Only a few states — New York, New Jersey, Massachusetts, Maine and Vermont — prohibit insurers from turning down would-be buyers because of preexisting conditions, Pollitz says. In most states, you have to fill out an application detailing your medical history, and even conditions as minor as hay fever can end up getting you outright denied or stuck with a huge premium for coverage.

Deductibles, copays and coinsurance can be considerably higher than in employer group plans, and yet individual policies typically cover far fewer benefits, she says. Many times the plans won’t cover maternity care, prescription drugs, rehabilitation and mental health services.

People who get rejected in the individual market can try to join their state’s high-risk pool, but even that’s not a guarantee and it’s also expensive, Pollitz says. Only those who’ve exhausted their full Cobra benefits are eligible for additional rights and guaranteed coverage in the individual market under Hipaa, another federal law.

Between high prices and obstacles to getting coverage outside of the employer-based system, it’s no wonder 47 million people are uninsured. Says Pollitz: “Every month, 2 million lose their eligibility for health insurance, and most of them will have at least a spell of a month where they’re uninsured.”

About Health Matters

Health Matters is a blog-style round-up of news and analysis concerning consumer health and the business of health care. The lead writer is MarketWatch reporter Kristen Gerencher, who also writes the Vital Signs column. Andrea Coombes and Jonathan Burton contribute editing. Gerencher won a 2006 explanatory journalism award from the Society of Professional Journalists-Northern California for a series she did on health savings accounts.